U.S. refineries consumed more crude oil last week, but still about a fifth less than a year ago, according to the EIA. (Source: Hart Energy; Shutterstock.com)
U.S. crude oil production hit its lowest point in more than two years last week, while stockpiles rose to a record high, showing the oil sector remains in the grip of a historic glut despite the easing of virus lockdowns and federal efforts to spark an economic recovery.
Production dropped 600,000 bbl/d to 10.5 million, the lowest since March 2018, according to the federal Energy Information Administration (EIA). Commercial crude stocks were at a record, rising to more than 539 million barrels.
U.S. oil production hit a record high of more than 13 million bbl/d in March, just before oil prices plunged.
Imports were down slightly but remained strong—including from Saudi Arabia, whose oil supplies to the U.S. remained near multiyear highs months after President Donald Trump lobbied the kingdom to end a market share war that crashed the oil price in March.
“Tankers move slowly, hence the delay between the Saudi April production increase and the arrival in the U.S.,” said Giovanni Staunovo, a commodity analyst at UBS.
The U.S. imported 1.4 million bbl/d of oil from Saudi Arabia last week, the EIA said, down slightly from a week earlier but more than three times the level in February, just before the price war. Imports of Saudi oil should taper off in the coming weeks.
U.S. production, down partly because of a storm in the Gulf of Mexico, continues to drift lower despite a recent oil price rally following OPEC’s extension of its cuts and signs of strengthening demand.
Some consultants believe U.S. oil output is much lower than the EIA estimates—but will soon rebound as producers restart wells they shut when prices collapsed this spring.
On June 17, WTI, the U.S. benchmark, was trading just beneath $38/bbl. In April, WTI briefly fell below zero as traders worried the supply glut would overwhelm U.S. storage tanks.
U.S. refineries consumed more crude last week, but still about a fifth less than a year ago. Gasoline demand inched lower last week and was down by about 20% compared with the same period in 2019—more evidence that the recovery is moving slowly.
“The combination of higher US crude imports and lower U.S. refinery runs are the main drivers of inventories reaching new record highs,” said Staunovo. “It would be even larger if Tropical Storm Cristobal hadn’t disrupted some Gulf of Mexico production last week.”
Recommended Reading
Q&A: Dan Pickering Talks M&A, US Production Growth and the Energy Transition
2023-01-27 - Dan Pickering, Chief Investment Officer of Pickering Energy Partners (PEP), discusses U.S. production and M&A after a “funky and weird” 2022 and sees the U.S. shale boom settling into a “shale business.”
Saudi Crude Exports Slip to Five-month Low in November
2023-01-19 - Saudi Arabia's crude oil exports decreased from about 7.77 MMbbl/d in October to approximately 7.28 MMbbl/d in November.
Saudi Crude Oil Exports Surge to 29-Month High
2022-11-17 - Saudi Arabia’s crude oil exports rose about 1.6% to 7.721 million bbl/d in September—the highest since April 2020—from 7.601 million bbl/d in August.
US Crude Turns Positive, Brent Pares Losses on Output on OPEC+ Rumors
2022-11-28 - “The word on the street is there’s rumor that OPEC+ is already starting to float the idea of a production cut on Sunday,” said Matt Smith, lead oil analyst at Kpler. “That’s helped reverse losses that were caused overnight by Chinese protests.”
Oil Prices Could Fall Without Further OPEC+ Cut, Analysts Say
2022-12-02 - OPEC+ to meet virtually Dec. 4, a possible sign they mean to stick with current oil production target